Energy in Iran - Oil

Oil

Main articles: Petroleum industry in Iran, National Iranian Oil Company, and Oil reserves in Iran See also: Ministry of Petroleum of Iran, 2007 Gas Rationing Plan in Iran, National Iranian Petrochemical Company, and Asalouyeh

Iran has the second largest oil reserves in the world, and the third largest exporter of it. According to 2006 estimates Iran produced about five percent of total global crude oil production. They produced 4.2 million barrels per day (670,000 m3/d) of total liquids and 3.8 million of those barrels were crude oil. Iran plans to invest $100 billion during the next four years in different sections of its oil industry (2009). By the end of 2009, Iranian oil R/P ratio was 89.4 years which is the world's highest. By 2009, Iran had 52 active rigs and 1,853 producing oil wells.

Iran possesses abundant fuels from which to generate energy. Since 1913 Iran has been a major oil exporting country. Oil industry output averaged 4 million barrels (640,000 m3) per day in 2005, compared with the peak output of 6 million barrels per day (950,000 m3/d) reached in 1974. Following the 1979 revolution, however, the government reduced daily oil production in accordance with an oil conservation policy. Further production declines occurred as result of damage to oil facilities during the war with Iraq. In the early 2000s, industry infrastructure was increasingly inefficient because of technological lags. Few exploratory wells were drilled in 2005. Iranian oil was nationalized in 1953 and thus is owned and operated by the National Iranian Oil Company (NIOC).

Iran held 10.3% of the world's total proven oil reserves and that figures out to be about 137.6 billion barrels (2.188×1010 m3) of oil reserves at the end of 2009. Oil also is found in northern Iran and in the offshore waters of the Persian Gulf. Nevertheless, in 2005 Iran spent US$4 billion dollars on gasoline imports, mainly because of contraband and inefficient domestic use that result from subsidies. Iran is one of the largest gasoline consumers in the world ranking second behind United States in consumption per car.

There is a growing recognition that prices must rise faster to curb consumption and ease the burden on the public finances. Cheap energy has encouraged wasteful consumption in Iran, and a brisk business in smuggling petrol into Iraq, Turkey, Pakistan and Afghanistan. Demand has also been supported by rapid increases in car production in recent years. In the absence of imports, the car industry has developed strongly (albeit from a low base) with output reaching over 1m vehicles in fiscal year 2006/07 (March 21-March 20).

The growth in consumption of domestically produced oil has been modest, owing to refining constraints. By contrast, fuel imports rose to 180,000 barrels per day (29,000 m3/d) in January 2005 from 30,000 barrels per day (4,800 m3/d) in 2000, and petrol consumption is estimated to have been around 1,800,000 barrels per day (290,000 m3/d) in 2007 (before rationing), of which about one-third is imported. These imports are proving expensive, costing the government about US$4bn in the first nine months of 2007/08, according to parliamentary sources. Nearly 40% of refined oil consumed by Iran is imported from India.

Iran contains 27 onshore and 13 offshore oil producing fields which are largely concentrated in the southwestern Khuzestan region near the Iraqi border. The Iranian government is heavily reliant on oil revenues and they have heavily subsidized the energy industries which figures out to be about 12% of Iran’s GDP. However, domestic oil consumption has decreased due to the alternative use of natural gas. Economic growth from these resources is uncertain and stunted in Iran due to these subsidies and population growth. Iran has been unable to reach it full production levels due to a combination of sanctions and war which has plagued the region. Iran’s oil fields have a natural decline rate at 8 percent for onshore wells and 10% for offshore fields. The Iranian recovery rate is currently approximately 27 percent which is well below the world average. Iran needs structural improvements made to coincide with their enhanced oil recovery efforts.